ICAS publishes updated Scottish charity auditor's report guidance
The ICAS Charities Panel has published updated guidance on auditor’s reports for ICAS firms acting as auditors of Scottish charities
The Guide is relevant to the audit of financial statements with reporting periods commencing after 1 February 2020 with filing after 31 December 2020. It should assist ICAS registered audit firms prepare auditor’s reports for Scottish charities in accordance with standards and guidance issued by the UK Financial Reporting Council (FRC).
Auditor’s reports for charitable companies and non-company charities preparing their financial statements in accordance with the Charities SORP (FRS 102) and FRS 102: The Financial Reporting Standard Applicable in the UK and Republic of Ireland, fall within the scope of the Guide.
FRC standards and guidance
In particular, the Guide has been updated to reflect changes to auditor’s reports arising from:
- International Standard on Auditing ISA (UK) 570: Going concern (revised September 2019).
- ISA (UK) 700: Forming an opinion and reporting on financial statements (revised November 2019) (updated January 2020).
- Bulletin: Illustrative auditor’s reports on United Kingdom private sector financial statements for periods commencing after 1 February 2020 for filing after 31 December 2020 (August 2021).
New illustrative reports
Three new illustrative reports have been added to the Guide. The previous edition included illustrative reports for a small charitable company and a non-company charity. The new reports are:
- An unmodified auditor’s report for a non-company charity registered in Scotland preparing group and parent charity financial statements.
- An auditor’s report for a non-company charity registered in Scotland with a material uncertainty related to going concern.
- Unmodified auditor’s report for a non-company charity registered in England & Wales and in Scotland.
Auditors are reminded that OSCR considers that they have a statutory duty to report under Section 46 of the Charities and Trustee Investment (Scotland) Act 2005 to the regulator if they issue:
- A non-standard ‘modified’ auditor’s opinion.
- An auditor’s report with a material uncertainty related to going concern.
- An auditor’s report with an emphasis of matter paragraph.
Further guidance on the statutory duty to report is set out jointly by the UK charity regulators in Matters of material significance reportable to UK charity regulators.
Key changes to auditor’s reports
The revisions to ISA (UK) 570 and ISA (UK) 700 brought significant changes to the wording of auditor’s reports for periods commencing on or after 15 December 2019, relating to going concern and irregularities, including fraud. However, the Guide is relevant to financial statements for periods commencing after 1 February 2020 with filing after 31 December 2020 to align with the latest edition of the FRC’s Illustrative auditor’s reports bulletin.
ISA (UK) 570 has been revised to require the auditor to make a positive statement in their auditor’s report about the trustees’ use of the going concern basis of accounting to prepare the financial statements.
ISA (UK) 700 has been revised to require the auditor to explain the extent to which the audit was considered capable of detecting irregularities, including fraud within their auditor’s report. In the FRC’s illustrative auditor’s report bulletin, this requirement is met in the section of the auditor’s report on the ‘Auditor’s responsibilities for the audit of the financial statements’. The illustrative examples in this Guide follow the same approach.
Other matters covered by the Guide
The illustrative auditor’s reports are accompanied by commentary to assist the auditors of Scottish charities to prepare auditor’s reports tailored to the circumstances of their charity clients.
The guidance is not intended to be comprehensive and does not deal with every circumstance. It is therefore not a substitute for the auditor’s own judgement or referring directly to standards and guidance issued by the FRC or to the relevant legislation and regulations.
FRC standards and guidance on audit and assurance matters are available here.
The accompanying commentary provides further guidance on:
- The accounting and reporting framework for Scottish charities.
- The legislative framework for the audit of Scottish charitable companies.
- The auditor’s responsibilities for the audit of financial statements.
- Elements of the auditor’s report.